Proposed VAT to 5% – Removing difficulties for the fertilizer industry


On October 8, 2020, the Ministry of Finance sent an official letter to ministries and agencies for comments on the proposal to develop a resolution on value added tax (VAT) policy to support and remove difficulties for businesses. domestic fertilizer production. This consultation is to implement the direction of Deputy Prime Minister Truong Hoa Binh on VAT to support businesses.

According to the Ministry of Finance, before January 1, 2015, fertilizers are subject to VAT at the rate of 5%.

The VAT rate for fertilizers to 5% will help remove difficulties for domestic fertilizer manufacturers

On November 26, 2014, the National Assembly passed Law 71/2014 / QH13 (Law 71) that fertilizers are changed from 5% VAT to not subject to VAT.

When Law 71 takes effect from January 1, 2015, all input VAT on fertilizer producers such as electricity, coal, chemicals, transportation, raw materials, even equipment Investments are not deductible. All arising costs are calculated by enterprises in production costs, increasing the production cost of fertilizers. Therefore, it is difficult for domestic fertilizers to compete with imported fertilizers.

Statistics of the Vietnam Fertilizer Association show that, since 2015, when implementing the Law on Tax 71, the domestic nitrogen fertilizer price has increased by 7.2 – 7.6%; DAP fertilizer increased from 7.3 – 7.8%, super phosphate fertilizer increased 6.5 – 6.8%; organic and NPK fertilizers increased from 5.2 to 6.1% … compared to the previous years when 5% VAT was applied to fertilizers.

Thereby, there is a risk of domestically produced fertilizer losing at home. Statistics data in the 5-year period (2015-2019) show that, on average, Vietnam annually imports more than 4.2 million tons of fertilizers with an average value of 1.2 billion USD; accounting for more than 40% of the total consumption demand of the country.

Meanwhile, fertilizer production and trading enterprises in Vietnam mainly spend on the domestic market, the percentage for export fluctuates between 20% -25% of the total output.

Due to not being able to deduct 100% of input material tax, domestic fertilizer manufacturing enterprises from 2015 up to now have been in a difficult situation when revenue and profit have decreased continuously, even many sales. fertilizer industry is moving from profitable business to loss.

Facing such situation, fertilizer enterprises and the Fertilizer Association have repeatedly proposed to put fertilizer products under value added tax, at 5%.

In August 2020, Deputy Prime Minister Truong Hoa Binh assigned the Ministry of Finance to submit to the Government for consideration to remove problems related to the value-added tax rate as directed in Notice 80 / TB-VPCP dated 18 / 6/2020.

In which, it is necessary to clearly state the necessity, economic efficiency, ensuring equality between domestic fertilizer production enterprises and importers.

Recently, on October 7, 2020, in Document No. 8405 / VPCP-KTTH of the Office of the Government announced the direction of Standing Deputy Prime Minister Truong Hoa Binh on VAT policy to support , and develop fertilizer businesses as follows:

“The Ministry of Finance urgently synthesizes opinions of Ministries and agencies: Ministry of Industry and Trade, Ministry of Agriculture and Rural Development, Ministry of Justice, and Vietnam Fertilizer Association on proposing value-added tax rates for fertilizers according to the principle of not increasing input costs for farmers while the Law on Value-Added Tax has not been revised in accordance with the guidance in Notice No. 80 / TB-VPCP dated June 18, 2020, Documents No. 1860 / VPCP -KTTH dated 11/7/2020 and No. 2505 / VPCP-KTTH dated September 16, 2020, clarifying the basis for proposing adjustments and impact assessment on related objects.

Completing the content of the report to the Government Report allowing submission to the National Assembly for approval of problems related to value-added tax rates for fertilizers when submitting to the National Assembly a resolution on the 2021 State budget estimate, report to the Government before 10/10/2020 ”.

According to the report of the Ministry of Finance sent to the Government on the Project Resolution on value added tax policy to support and develop fertilizer production enterprises: Recommendation to transfer fertilizer products from objects not subject to VAT subject to VAT at the rate of 5%.

Accordingly, fertilizer producers will be deducted input VAT on purchased goods and services, including VAT on goods purchased or imported to create fixed assets used for fertilizer production. fertilization. The regulation that fertilizer products are subject to VAT at the rate of 5% applies in all stages: import, production, wholesale, retail to consumers, thus creating competition. equality between domestically produced fertilizers and imported fertilizers of the same type.

According to economic experts, while Law 71 has not been revised, the calculation of the proposed VAT rate for fertilizers by ministries and branches to 5% will help remove difficulties to improve the competitiveness of manufacturing enterprises. domestic fertilizer, thereby reducing the amount of fertilizer imported from abroad into the domestic market.

Le Kim Lien

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